As a real estate agent, I frequently get asked by buyers if shopping for a mortgage will lower their credit score. The short answer is yes it does lower your score
– but not by a lot, only 5 to 10 points total. Follow this link
to see all of the different ranking factors that make up your credit score. Credit Inquiries factor in for only 10% of your total credit score, so payment history, debt levels, and credit history have a much more significant impact on your overall score. It is important to note that no one
FICO knows the exact algorithm for determining credit scores. Lenders I talk to say that for the first 3 Hard inquiries the credit bureaus are more lenient so you shouldn’t see a drastic change in credit score for the first 3 pulls.
The only time the small ding from credit inquiries will matter is if you are close to a cutoff for a slightly better interest rate. I think a lot of buyers over worry about too many hard inquiries affecting their score- we are talking at most 1/8 of a point difference in interest rate max- but if you are a first-time buyer stretching to get into your first home, I get it, getting the most out of your money and every dollar matters. Lenders will quote your interest rates based on your credit score, as well as other factors. I often get asked by buyers that they see a lower interest rate quoted online then the mortgage interest rate they were quoted by a lender. The reason is that the advertised internet interest rates are teaser rates- they advertise THE LOWEST possible interest rate to get people to click. Once you have a full quote run by the lender, unless you are an A++ borrower the rates will be higher than advertised, by as much as one whole point! In my experience, most lenders will be pretty close with Direct Lenders offering the slightly better rates but having stricter qualifying requirements (Better for W2 employees), and mortgage brokers having slightly higher interest rates but more flexible programs guidelines (Better for independent contractors, 1099 employees, and business owners).